By Alvin Cheng-Hin Lim

Vietnam’s New Leadership and Its Prospects for Relations with China

On
April 7, 2016, Vietnam’s leadership transition was completed when the National
Assembly elected Nguyen Xuan Phuc as the new Prime Minister, replacing Nguyen
Tan Dung, whom the National Assembly had voted the previous day to remove from
office three months before the end of his term. Dung, who had come into office
in 2006 during the global financial crisis, had overseen Vietnam’s recent
growth under the conditions of capitalist globalization. Indeed, a Pew Research
poll in 2014 found that 95 percent of the respondents in Vietnam felt that life
was better under the capitalist free market, which ironically made nominally
communist Vietnam the country that was the most supportive of capitalism of all
the countries surveyed, and this deep public confidence in Vietnam’s capitalist
path can be seen in the recent 11 percent average monthly growth in consumption
that has been driven by consumer purchases of automobiles and real estate
(Keck, 2014; Wilson, 2016).

However,
Dung’s attempts to reform the country’s inefficient state-owned enterprises
(SOEs) were expensive failures — especially in the cases of corruption-ridden
SOEs like the Vietnam Shipbuilding Industry Group and Vietnam Shipping Lines — and
in January 2016 he lost a challenge at the 12thNational Congress of
the Vietnamese Communist Party (VCP) to unseat General Secretary Nguyen Phu
Trong (“Vietnam’s prime minister,” 2012; “Vietnam’s Prime Minister,” 2016).
While the media has portrayed General Secretary Trong’s re-election as a
victory for the conservative pro-China faction of the VCP against Dung’s pro-US
reformist faction, experts note that the reality is more complicated:

“Trong’s approach
to China is soft in public but firmer behind the scenes. He is cautious about
relations with the United States but he also supports closer ties with
Washington and joining the Trans-Pacific Partnership (TPP).”

(Vuving, 2016)

Indeed,
experts expect the new leadership to maintain the thrust of former Prime
Minister Dung’s reform agenda (Petty & Nguyen, 2016). The International
Monetary Fund in particular has highlighted the need for Vietnam to complete
its reforms of its banking sector and SOEs, especially given the vulnerability
of the country’s open economy to external challenges like the global collapse
in commodity prices as well as China’s economic slowdown (Boudreau, 2016). The new
leadership in Vietnam will not only have to reboot the earlier failed restructuring
of the SOE and banking sectors, but will also have to implement the legislative
and administrative measures mandated under Vietnam’s free trade agreements
(FTAs) with its trading partners, especially the TPP, including the removal of
tariffs and other trade barriers, as well as the establishment of a common set
of rules with its FTA partners on labor standards and other legislative benchmarks
(Tan, 2016). Should the TPP successfully come into effect, the new preferential
access Vietnam’s export sectors — including the seafood, textile, and apparel industries
— will gain to the US and other markets will be expected to generate USD 36
billion, or an additional 11 percent of GDP growth, for Vietnam by 2030, hence
the Vietnamese government’s successful passage and implementation of the
necessary legislative and administrative measures for the TPP and other FTAs
will be crucial for the country’s economic future (Boudreau, 2015).

While
Prime Minister Phuc has considerably less experience than his predecessor, he
is also less associated with the taint of corruption, a problem which had
expanded in Vietnam during the recent reform era (Davies, 2015; “Vietnam’s
Prime Minister,” 2016). Indeed, in his inaugural address as Prime Minister to
the National Assembly, Phuc announced that the anti-corruption campaign would
be one of his top priorities (“Vietnam’s newly elected,” 2016). Phuc will likely
be supported in his efforts by VCP General Secretary Trong, who was deeply
involved with the anti-corruption campaign during the Dung era:

“Shortly after
being elected VCP General Secretary in 2011, Trong launched a major campaign
aimed at uprooting corruption. The main target of this anti-graft drive was
Prime Minister Dung.”

(Vuving, 2016)

Phuc
will likely also receive support from the third member of the ruling
triumvirate, Vietnamese President Tran Dai Quang, who was elected to office by
the National Assembly on April 2, 2016. President Quang’s career path was with
the Vietnamese government’s internal security apparatus, including a stint as
Minister of Public Security, and the party’s selection of someone with his
policing background to be Head of State suggests a desire among the party
members to strengthen the Vietnamese party-state though internal housecleaning,
especially after the recent excesses of capitalist expansion (Petty, 2016;
“Newly-elected President,” 2016). While Vietnam’s recently emboldened voices of
dissent may expect to face a clampdown under the new leadership, would the new
triumvirate of President Quang, Prime Minister Phuc, and VCP General Secretary Trong
also usher in a sweeping anti-corruption campaign on the scale of that introduced
by President Xi Jinping in China (Chen, 2016; “Communist Vietnam,” 2016)?

With
respect to China, the South China Sea promises to continue to be a source of
tension in the Sino-Vietnamese relationship. Already, just a few days after
Nguyen Xuan Phuc’s election as Prime Minister, the Vietnamese government had to
call on their Chinese counterparts to remove the controversial Haiyang Shiyou
981 oil exploration rig from contested waters in the Gulf of Tonkin; the
placement of this very same rig at the contested Paracel Islands in 2014 had
then triggered violent anti-Chinese protests in Vietnam. Indeed, the Vietnamese
government further called on China to “not take additional unilateral actions
that further complicate the situation” in their contested maritime zones. However,
the new Prime Minister’s pledge to protect Vietnamese sovereignty will likely
be tested by China’s growing assertiveness on its claims in the South China Sea
(“Vietnam demands,” 2016).

The new Vietnamese leadership may also
find itself caught in an armed confrontation between China and the US,
especially with both major powers accelerating the technological development of
their naval and submarine capabilities.

China’s
long-distance fishing fleet in particular is likely to trigger confrontations
in the contested maritime zones, especially when they encroach on fisheries
claimed by Vietnam and the other claimant states as exclusive economic zones.
The increasing security and logistical support provided to these fishing
vessels by oil resupply ships and the Chinese coast guard, not to mention the
network of island bases China has controversially established across the South
China Sea, allow these approximately 2,000 fishing vessels to conduct their
activities deeper in contested waters and with greater confidence, but at the
same time increasing the chances of armed confrontations occurring between
Chinese coast guard and naval vessels and those of the other claimant states
(Mollman, 2016).

The
new Vietnamese leadership may also find itself caught in an armed confrontation
between China and the US, especially with both major powers accelerating the
technological development of their naval and submarine capabilities, including
breakthrough technologies like the US Navy’s development of unmanned autonomous
naval vessels. The application of such disruptive military technologies could dangerously
intensify the impact of possible armed confrontations in the South China Sea
(Tucker, 2016). The upcoming May 2016 visit to Vietnam by US President Barack
Obama should help clarify the foreign policy direction of the new Vietnamese
leadership, especially in the increasingly fractious context of growing Chinese
and US assertiveness in the South China Sea (Xuan, 2016).

At
the same time, the new Vietnamese leadership cannot afford to allow its
geopolitical tensions with China to cloud their productive economic
relationship. Sino-Vietnamese bilateral trade reached USD 67 billion in 2015,
and Chinese firms are among those which are expected to invest in new manufacturing
plants in Vietnam to take advantage of the preferential access to foreign
markets that will be granted under the TPP and other FTAs. Should domestic
politics in the US lead to the non-ratification of the TPP, China’s economic
partnership will become even more important for Vietnam, especially with the
government facing economic challenges from its USD 2 billion budget deficit, as
well as the loss of revenue from the global collapse in oil prices and a
drought in the rice-producing Mekong Delta (Boudreau, 2015; Boudreau &
Nguyen, 2016).

Observers
will also be waiting to see if the new Vietnamese leadership will be open to
partnering with China on a “Belt and Road” transportation megaproject, in particular
the long-planned line of the proposed Pan-Asian high-speed railway network running
from China through Vietnam and Cambodia into Thailand (Lim, 2015).

References

Boudreau,
J. (2015, October 9). The Biggest Winner from TPP Trade Deal May Be Vietnam. Bloomberg. Retrieved from
http://www.bloomberg.com/news/articles/2015-10-08/more-shoes-and-shrimp-less-china-reliance-for-vietnam-in-tpp

Davies,
N. (2015, April 22). Vietnam 40 Years On: How a Communist Victory Gave Way to
Capitalist Corruption. The Guardian.
Retrieved from http://www.theguardian.com/news/2015/apr/22/vietnam-40-years-on-how-communist-victory-gave-way-to-capitalist-corruption

About The Author

Alvin Cheng-Hin Lim is a research fellow with International Public Policy Pte. Ltd. (IPP), and is the author of Cambodia and the Politics of Aesthetics (Routledge 2013). He received his Ph.D. in Political Science from the University of Hawaii at Manoa, and has taught at Pannasastra University of Cambodia and the American University of Nigeria. Prior to joining IPP, he was a research fellow with the Longus Institute for Development and Strategy.